Introduction to Macroeconomics Final Exam Questions
Course Introduction
Introduction to Macroeconomics offers a foundational exploration of the economic principles that govern whole economies. This course covers key topics such as national income, inflation, unemployment, economic growth, monetary and fiscal policy, and international trade. Students will learn how to interpret economic indicators, understand the role of government and central banks, and analyze current economic issues from a macroeconomic perspective. By the end of the course, participants will be equipped with tools to critically assess economic policies and their impact on overall economic stability and growth.
Recommended Textbook
The Macro Economy Today 13th Edition by Bradley Schiller Cynthia Hill
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Page 2
Chapter 1: Economics: The Core Issues
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Q1) Which of the following correctly characterizes the shape of a constant opportunity cost production possibilities curve?
A)A straight line indicating that the law of increasing opportunity costs applies.
B)A straight line when there is constant opportunity costs.
C)A line that curves outward when resources are perfectly adaptable in the production of different goods.
D)A line that curves inward when resources are perfectly adaptable in the production of different goods.
Answer: B
Q2) In a market economy,the people who receive the goods and services that are produced are those who
A)Need the goods and services the most.
B)Have the most political power.
C)Want the goods and services the most.
D)Are willing to pay the highest price.
Answer: D
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3
Chapter 2: The Us Economy: A Global View
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Q1) A rich country that opened its borders to trade with a poor country would cause in the long run
A)More equitable distribution of income GDP for the rich country but not the poor country.
B)More equitable distribution of income GDP for the poor country but not the rich country.
C)More equitable distribution of income GDP for the rich country and the poor country.
D)None of the choices are correct.
Answer: C
Q2) The investment in human capital through education and training can result in A)Greater productivity.
B)Low factor mobility.
C)Less capital-intensive production.
D)Reduced output per labor hour.
Answer: A
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Chapter 3: Supply and Demand
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Q1) If the price of "X" increases and you buy more "Y," then
A)"X" and "Y" are complements,and the price of "Y" will increase.
B)"X" and "Y" are complements,and the price of "Y" will decrease.
C)"X" and "Y" are substitutes,and the price of "Y" will increase.
D)"X" and "Y" are substitutes,and the price of "Y" will decrease.
Answer: C
Q2) Which of the following is a determinant of market supply?
A)Consumer expectations.
B)Consumers' income.
C)Consumers' desire for the good.
D)Available technology.
Answer: D
Q3) An increase in the equilibrium price of electricity can be caused by
A)An increase in the supply of electricity.
B)An increase in the demand for electricity.
C)A decrease in the demand for electricity.
D)An increase in the quantity demanded of electricity.
Answer: B
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Chapter 4: The Role of Government
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Q1) Micro and macro failures of the marketplace never justify government intervention. The potential micro and macro failures of the marketplace provide specific justification for government intervention.
A)True
B)False
Q2) An In the News article titled "Perpetuating Poverty: Lotteries Prey on the Poor" reports that poor people spend a larger percentage of their income on government-promoted gambling than do rich people.On the basis of this information,we can conclude that lotteries function as
A)An income tax.
B)A progressive tax.
C)A property tax.
D)A regressive tax.
Q3) If Good X has social demand that is less than market demand,then Good X must be a
A)Public good.
B)Good with an external cost.
C)Good with an external benefit.
D)Good suffering from the free-rider problem.
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Chapter 5: National Income Accounting
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Q1) If a nation has a population of 100 million,a labor force of 60 million,and GDP of $200 billion,then GDP per capita must be
A)$2,000.00.
B)$3,333.33.
C)$200.00.
D)$333.33.
Q2) To measure an economy's output adjusted for changes in the price level,one would use
A)GDP per capita.
B)Value added.
C)Real GDP.
D)Nominal GDP.
Q3) Suppose the total market value of all the final goods and services produced in the country of Rushya was $8 billion in 2008 (measured in 2008 prices)and $9 billion in 2009 (measured in 2009 prices).Which of the following statements is definitely correct?
A)Production increased in Rushya between 2008 and 2009.
B)Real GDP increased in Rushya between 2008 and 2009.
C)Average price levels increased in Rushya between 2008 and 2009.
D)Whether real GDP increased cannot be determined with the information given.
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Chapter 6: Unemployment
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Sample Questions
Q1) After Christmas,retail sales fall and many clerks are laid off until the following Christmas.This is an example of which of the following types of unemployment?
A)Structural unemployment.
B)Frictional unemployment.
C)Cyclical unemployment.
D)Seasonal unemployment.
Q2) Structural unemployment occurs when
A)Workers do not have the skills required to fill the vacant positions in the job market.
B)Firms fail in the normal course of business activity.
C)An industry experiences a seasonal downturn.
D)There is inadequate demand for labor.
Q3) As a result of outsourcing,
A)Domestic workers may become more productive.
B)Profits decrease for domestic companies.
C)GDP definitely decreases.
D)Unemployment must increase in the long run.
Q4) According to Okun's Law,how does a 2 percent increase in unemployment affect the economy?
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8
Chapter 7: Inflation
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Q1) If consumers attempt to buy more goods than the economy can produce,the result is
A)Unemployment.
B)Demand-pull inflation.
C)Cost-push inflation.
D)The wealth effect.
Q2) \(\begin{array}{rrrr}&\text { Nominal GDP }\\ &\text { (in billions of dollars) }&\text { GDP deflator }&\text { CPI }\\\hline
2002 & \$ 6,992.4 & 106.2 & 151.6 \\ 2003 & 7,431.6 & 109.1 & 153.8 \\ 2004 & 7,843.2 & 112.3 & 157.8 \end{array}\)
Table 7.1 GDP Based on Table 7.1,the real GDP for 2004 was
A)$4,970.3 billion.
B)$6,811.7 billion.
C)$6,584.2 billion.
D)$6,984.1 billion.
Q3) Why did the Full Employment and Balanced Growth Act establish 3 percent inflation as the benchmark rather than zero inflation?
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Chapter 8: The Business Cycle
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Sample Questions
Q1) In the early 1900s,which of the following was not true?
A)Falling price levels appeared to limit an increase in unemployment.
B)Periods of high unemployment tended to be brief.
C)Say's Law seemed to work.
D)Government intervention was commonly used to stimulate the economy.
Q2) During a recession,real output actually falls.
Real GDP falls during a recession,and unemployment rises.
A)True
B)False
Q3) Which of the following is a basic macro policy strategy?
A)A laissez faire approach.
B)Shifting the aggregate supply curve.
C)Shifting the aggregate demand curve.
D)All of the choices are correct.
Q4) The quantity of real output supplied rises as the price level rises,ceteris paribus. There is a direct and positive relationship between the price level and the economy's output.
A)True
B)False
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Chapter 9: Aggregate Demand
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Q1) Which of the following lists all the components that are included in aggregate demand?
A)Consumption,government spending,net exports,and investment.
B)Government spending,saving,consumption,and investment.
C)Investment,imports,exports,consumption,and taxes.
D)Net exports,government spending,consumption,and transfer payments.
Q2) The four components of aggregate spending are consumption,saving,imports,and taxes.
The four components of aggregate spending are consumption,investment,government expenditures,and net exports.
A)True
B)False
Q3) If an increase in disposable income causes consumption to increase from $4,000 to $10,000 and causes saving to increase from $1,000 to $5,000,then it can be inferred that the MPS equals
A)0.60.
B)0.40.
C)0.05.
D)-0.60.
Q4) How can autonomous consumption be greater than zero when income is zero?
Page 11
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Chapter 10: Self-Adjustment or Instability
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Q1) If actual investment exceeds desired investment,then
A)A recession can develop.
B)Leakages are greater than injections.
C)An inflationary spiral can develop.
D)Inventories are being depleteD.An excess buildup of inventories may lead firms to cut back production,which could result in a recession.
Q2) Classical economists assume that
A)Spending leakages exceed spending injections.
B)Interest rate adjustment will cause business investment to equal consumer saving.
C)The economy might experience persistent macro instability.
D)No leakages would occur.
Q3) Assuming an upward-sloping AS curve,if an economy is at full employment and investment spending decreases while all other levels of spending remaining constant,then
A)A GDP gap emerges.
B)The price level increases.
C)Output increases.
D)The unemployment rate falls.
Q4) What are leakages,and how do they affect the economy?
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Chapter 11: Fiscal Policy
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Q1) Which of the following would not be a policy option to eliminate an AD shortfall?
A)Increase government purchases.
B)Reduce taxes.
C)Reduce transfer payments.
D)Increase transfer payments.
Q2) A $500 increase in government spending contains more fiscal stimulus than a $500 tax cut.
When government spending increases by $500,the initial spending injection will be $500.Only part of a $500 tax cut is used to increase consumption; the remainder is saved.Accordingly,the initial spending injection is less than $500.This makes tax cuts less stimulative than government purchases of equal size.
A)True
B)False
Q3) Today the federal government collects nearly
A)$1 billion a year in tax revenues.
B)$500 billion a year in tax revenues.
C)$1 trillion a year in tax revenues.
D)$3 trillion a year in tax revenues.
Q4) Why is the tax cut multiplier different from the purchases multiplier?
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Chapter 12: Deficits and Debt
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Q1) The only way to stop the growth of the national debt is to eliminate the budget deficits that create debt.
A balanced annual budget is the first step in debt reduction.To reduce the debt there must be a budget surplus where tax revenue exceeds government spending.
A)True
B)False
Q2) Externally held debt refers to that part of the national debt owned by private individuals,and internally held debt refers to that part owned by government agencies. Internal debt is U.S.government debt held by U.S.households and institutions,whereas external debt is debt held by foreign households and institutions.
A)True
B)False
Q3) To pay back Social Security loans,Congress could do all of the following except A)Raise future taxes.
B)Sell fewer U.S.Treasury bonds.
C)Increase budget deficits.
D)Reduce spending on non-Social Security programs.
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14
Chapter 13: Money and Banks
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Sample Questions
Q1) What are the two essential functions banks perform for the economy,and why are they important?
Q2) Suppose a banking system has a required reserve ratio of 10 percent.What is the maximum possible increase in the money supply in response to a $2 billion increase in excess reserves for the whole banking system?
A)$20 billion.
B)$2 billion.
C)$200 million.
D)$210 billion.
Q3) Which of the following is an example of barter?
A)Jordan buys eggs with Canadian dollars from Ryan's Grocery,and Ryan buys gas from Jordan's Gas Station with Japanese yen.
B)Nicki uses her mom's credit card to purchase her textbooks online.
C)Keisha takes care of the neighbor's children,and the neighbor mows Keisha's yard as repayment.
D)Natalie buys gum at a convenience store and tells the cashier to keep the dollar change.
Q4) Describe the three purposes that money must perform.
Q5) How does the banking system create money?
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Chapter 14: The Federal Reserve System
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Q1) Suppose the required reserve ratio is 10 percent,and the Fed buys $5 million worth of bonds from the public.If the public deposits this amount into transactions accounts,the money supply will
A)Increase directly by $5 million in reserve deposits,with an additional lending capacity of $40 million created for the banking system.
B)Not be affected directly,but an additional lending capacity of $50 million will be created for the banking system.
C)Increase directly by $5 million in reserve deposits,with an additional lending capacity of $45 million created for the banking system.
D)None of the choices are correct.
Q2) Which of the following is true about the Monetary Control Act of 1980?
A)It reduced the distinction between different types of depository institutions.
B)It further restricted the Federal Reserve's control of the banking system.
C)It placed S&Ls,credit unions,mutual savings banks,and nonmember banks under regulatory institutions other than the Fed.
D)It deregulated the banking industry.
Q3) Why do banks typically maintain a low level of excess reserves?
Q4) Is the Federal Reserve insulated from political pressures in any way? Explain.
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Chapter 15: Monetary Policy
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Q1) Ceteris paribus,the quantities of money people are willing and able to hold
A)Decrease as interest rates fall.
B)Increase as interest rates fall.
C)Increase as the money supply decreases.
D)Decrease when the speculative demand increases.
Q2) If the economy is in the vertical portion of the aggregate supply curve,according to monetarists,an increase in the money supply in the long run will
A)Increase the price level.
B)Decrease the price level.
C)Increase the output level.
D)Decrease the output level.
Q3) According to Bernanke's policy guide,a half percentage point increase in long-term interest rates will
A)Increase AD by $50 billion.
B)Decrease AD by $100 billion.
C)Increase AS by $50 billion.
D)Decrease AS by $100 billion.
Q4) Use the equation of exchange to explain the impact of an increase in the money supply if velocity and output are stable.
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Chapter 16: Supply-Side Policy: Short-Run Options
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Q1) Tax incentives that encourage saving,investment,and work will shift the AS curve to the right.
These supply-side policies result in a rightward shift of AS because they lower production costs.
A)True
B)False
Q2) A decrease in marginal tax rates will cause entrepreneurship to _________ and AS to shift to the _______.
A)increase; left
B)increase; right
C)decrease; left
D)decrease; right
Q3) By making infrastructure improvements,the government would change the Misery Index by:
A)Raising the unemployment rate but lowering the inflation rate.
B)Lowering the unemployment rate but raising the inflation rate.
C)Raising the unemployment rate and raising the inflation rate.
D)Lowering the unemployment rate and lowering the inflation rate.
Q4) What is the premise behind supply-side economics,and what are the economic outcomes?
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Chapter 17: Growth and Productivity: Long-Run Possibilities
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Q1) One possible constraint to limitless growth is
A)Irreversible environmental damage.
B)A limited supply of arable land.
C)A capital stock that grows too quickly.
D)The fact that technological advance cannot go on forever.
Q2) Assume the real U.S.GDP in 1997 was $7,269 billion and the U.S.population was 268 million,and the real U.S.GDP in 1998 was $7,552 billion and the U.S.population was 270 million.From 1997 to 1998,the per capita real GDP
A)Remained unchanged.
B)Decreased.
C)Increased.
D)Cannot be determined from the information given.
Q3) The percentage change in real GDP from one period to another is called A)Real GDP.
B)Nominal GDP.
C)The growth rate.
D)GDP per capita.
Q4) What is the most common measure of productivity? How is it calculated?
Q5) Is it possible for GDP to increase but for the standard of living to decrease? Explain.
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Chapter 18: Theory Versus Reality
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Q1) Many economic policies fail for all of the following reasons except
A)It is difficult to accurately measure economic performance.
B)Economic forecasts may be inaccurate.
C)There are significant lags in response to policy implementation.
D)Politicians and economists work together in formulating policies.
Q2) The decision concerning how the dollars left over from a defense cutback will be distributed is an example of
A)A goal conflict.
B)A design problem.
C)A velocity problem.
D)An implementation problem.
Q3) Which of the following is not a policy to reduce stagflation?
A)Restricting immigration.
B)Developing infrastructure.
C)Investing in human capital.
D)Deregulation.
Q4) Describe how delays can prevent economic policy from being successful.
Q5) Compare the Keynesian and monetarist views about how monetary tools should be used.
Q6) Do monetarists favor rules or discretionary policy? Why?
Page 20
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Chapter 19: International Trade
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Q1) A country will not trade unless
A)It has an absolute advantage.
B)The terms of trade are superior to domestic opportunities.
C)Its balance of trade is in a surplus position.
D)The production possibilities increase.
Q2) Trade restrictions
A)Reduce the gains from trade for the country as a whole.
B)Increase the gains from trade for poor countries.
C)Reduce the number of hours employees must work.
D)Increase the standard of living for the country as a whole.
Q3) An embargo is
A)A prohibition on exports or imports.
B)A tax imposed on imported goods.
C)A limit to the quantity of a good that may be imported in a given time period.
D)An orderly marketing agreement.
Q4) Which of the following groups has an interest in encouraging free trade?
A)Workers in import-competing industries.
B)Producers in import-competing industries.
C)Neither workers nor producers in any industry are in favor of trade.
D)Workers in export industries.
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Chapter 20: International Finance
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Q1) Appreciation of the U.S.dollar can be caused by
A)A decrease in the demand for dollars.
B)An increase in the demand for dollars.
C)An increase in the supply of dollars.
D)A decrease in the U.S.interest rate.
Q2) Use a model of the dollar-euro foreign exchange market to illustrate how the value of the dollar is determined in terms of the euro.Identify two factors that would increase the value of the dollar in terms of the euro.
Q3) The exchange rate is the
A)Opportunity cost at which goods are produced domestically.
B)Balance-of-trade ratio of one country to another.
C)Price of one country's currency expressed in terms of another country's currency.
D)Amount of currency that can be purchased with one ounce of golD.The price of one currency in terms of another is the exchange rate; for example,$2 = £1 indicates that a British pound costs two dollars.
Q4) Explain what economists mean when they say that the United States is a net debtor nation.Identify a potential problem and a positive aspect associated with this status.
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Chapter 21: Global Poverty
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Q1) Output per labor-hour is used to measure the ________ of labor.
A)effort
B)intelligence
C)productivity
D)seriousness
Q2) The Millennium Poverty Goal is the United Nations' goal of reducing the global rate of extreme poverty to ___ percent by 2015.
A)15
B)10
C)5
D)0
Q3) The reduction in world poverty from 1990 to 2006 was due almost entirely to the decrease in poverty in A)Canada.
B)Mali.
C)China.
D)Ethiopia.
Q4) Explain the difference between poverty in the United States and poverty in the rest of the world.
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